Non-GAAP(1) operating profit was $1.3 billion, with non-GAAP
diluted earnings per share (EPS) of $0.37, up 6% from $0.35 in the
prior-year period. Non-GAAP diluted EPS and non-GAAP net earnings for
the first quarter reflect a $135 million adjustment on an after-tax
basis, or $0.05 per diluted share. GAAP operating profit for the first
quarter was $1.2 billion. GAAP diluted EPS was $0.32 per share, up 7%
from $0.30 in the prior-year period.

On Jan. 21, 2005, HP announced it had settled all ongoing patent
litigation with Intergraph Corporation. This settlement had an impact
of approximately $0.03 per share on first quarter 2005 GAAP and
non-GAAP net earnings.

HP benefited during the quarter from a reduced non-GAAP tax rate
of 13.3%, which reflects the tax impact of the Intergraph settlement
and the resolution of prior-period tax items.

"HP had a solid first quarter, highlighted by strong growth and
profit in our Personal Systems Group, strong revenue growth in our
Services business and cash flow from operations of $1.6 billion," said
Robert Wayman, HP chief executive officer and chief financial officer.

"While we continue to make progress in growing our top line, there
is work to be done to improve our profitability. As the board conducts
a CEO search, our management team is focused on driving improved
execution to serve our customers, strengthen our competitiveness and
improve shareholder value," Wayman said.

During the quarter, on a year-over-year basis, revenue in Europe,
the Middle East and Africa (EMEA) grew 12% to $9.3 billion, in
Americas grew 6% to $8.9 billion and in Asia Pacific/Japan grew 15% to
$3.3 billion. On a consolidated basis, when adjusted for the effects
of currency, first quarter 2005 revenue grew 5% year-over- year.

Imaging and Personal Systems Group

The Imaging and Personal Systems Group (IPSG), which was formed in
mid-January, consists of the Personal Systems Group (PSG) and the
Imaging and Printing Group (IPG). IPSG reported first quarter revenue
of $12.9 billion, up 7% year-over-year. Operating profit for the first
quarter totaled $1.1 billion, or 8.3% of revenue, compared to $1.0
billion, or 8.5% of revenue, in the prior-year period.

"The formation of the Imaging and Personal Systems Group provides
us with a unique opportunity to leverage the strengths of both groups
into one unified business," said Vyomesh (VJ) Joshi, executive vice
president, Imaging and Personal Systems Group, HP. "Today, our
combined organization has a stronger focus on business and customer
solutions that enables us to accelerate profitable growth and
strengthen our market position."

The Technology Solutions Group (TSG) consists of Enterprise
Storage and Servers, Software and HP Services. The group reported
revenue of $8.1 billion, up 14% from the prior-year period. Operating
profit for the quarter totaled $312 million, or 3.9% of revenue, down
from $365 million, or 5.2% of revenue, year-over-year.

"TSG posted strong top line results for the quarter, but we
continue to face ongoing margin pressure due to pricing and product
mix, as well as costs associated with workforce reductions. We are
actively managing our cost structure to achieve improved
profitability," said Ann Livermore, Executive Vice President, HP's
Technology Solutions Group. "In this highly competitive environment,
I'm especially proud of the strong top line we achieved in HP
Services, which continues to grow faster than the market and our
leading competitors."

Enterprise Storage and Servers

Enterprise Storage and Servers (ESS) reported revenue of $4.0
billion, up 9% over the prior-year period. On a year-over-year basis,
industry-standard server revenue increased 19%, business-critical
systems (BCS) revenue declined 2% and networked storage revenue was
down 1%. Within BCS, HP-UX revenue growth of 3% year-over-year was
more than offset by NonStop declines of 19% and ongoing declines in
AlphaServer sales. ESS reported operating profit of $71 million for
the quarter, or 1.8% of revenue, down from $153 million in the
prior-year period.

HP Financial Services (HPFS) reported revenue of $555 million, up
26% year-over- year. Finance volume, a leading indicator of future
revenue, grew 25% over the prior-year period and net portfolio assets
increased by 3% to $7.2 billion. Operating profit was $45 million, or
8.1% of revenue, up from $29 million in the prior-year period.

Asset management

Inventory ended the quarter at $7.1 billion, essentially flat
sequentially and up $633 million year-over-year. Accounts receivable
declined $1.6 billion sequentially and increased $344 million over the
prior-year period to $8.7 billion. HP's dividend payment of $0.08 per
share in the first quarter resulted in a cash usage of $233 million.
In addition, HP utilized $637 million of cash during the first quarter
in connection with stock repurchases. HP exited the quarter with $13.6
billion in gross cash, which includes cash and cash equivalents of
$13.3 billion and short- and certain long-term investments of $0.3
billion.